Over the past decade, the “fair trade” movement has become increasingly popular, especially among Christians who seek market-based approaches to alleviating poverty. But does fair trade, which advocates the payment of a higher price to producers such as coffee farmers, actually work as advertised?
Economist Victor Claar argues in his new book, Fair Trade: Its Prospects as a Poverty Solution, that the fair trade movement simply “cannot deliver on what it promises,” and Christians would do well to pay heed. In a review of the book, Joseph Sunde says:
Given that coffee is perhaps the most popular of fair-trade commodities, Claar focuses his attention there, providing an initial overview of the coffee market itself, followed by a discussion of fair trade strategies as commonly applied. Here, we learn a few important things: (1) coffee is easy to grow, (2) its price is inelastic, and (3) the “market appeal” of one’s beans is essential for success. Additionally, and most importantly, (!!!) demand is dropping while supply is rising.
“Simply put,” Claar explains, “coffee growers are poor because there is too much coffee.”
Sounds like a good spot for some Western stimulus, eh?
The book offers plenty of arguments against such schemes, but this often unspoken reality illuminates the most central: Artificial, top-down fair trade programs toy with price signals and manipulate individuals to do the wrong thing in the wrong place at the wrong time. “Incentives matter,” says Claar. “Once the stakes of any economic game have changed, people alter their behavior accordingly.”
Such manipulation might indeed be helpful if the do-gooders of Equal Exchange could actually understand and predict market fluctuations, but they can’t. Thus, their activities spur coffee growers to follow distorted prices toward ends they might otherwise avoid. On the whole, this imposes a static view of opportunity on such farmers and inhibits them from rising above their circumstances. As Claar explains, it “keeps the poor shackled to activities that, while productive, will never lead to poverty reduction on a large scale — or even a modest one.” [emphasis in original]
On a related note, a new study published in Ecological Economics found that over a ten-year period certified organic and organic fair-trade producers became poorer relative to conventional producers:
The fair-trade business is filled with contradictions.
For starters, it discriminates against the very poorest of the world’s coffee farmers, most of whom are African, by requiring them to pay high certification fees. These fees — one of the factors that the German study cites as contributing to the farmers’ impoverishment — are especially perverse, given that the majority of Third World farmers are not only too poor to pay the certification fees, they’re also too poor to pay for the fertilizers and the pesticides that would disqualify coffee as certified organic.
Their coffee is organic by default, but because the farmers can’t provide the fees that certification agencies demand to fly down and check on their operations, the farmers lose out on the premium prices that can be fetched by certified coffee.
To add to the perversity, it’s an open secret that the certification process is lax and almost impossible to police, making it little more than a high-priced honour system. Although the certification associations have done their best to tighten flaws in the system, farmers and middlemen who want to get around the system inevitably do, bagging unearned profits. Those who remain scrupulous and follow the onerous and costly regulations — another source of inefficiency the German study notes in its analysis — lose out.
As Jonathan H. Alter says, “Labeling coffee as “fair-trade” enables merchants to charge a premium, but it’s not clear those consumers who are willing to shell out extra money for “fair-trade” coffee are getting what they pay for.”
May 18th, 2011 | 3:25 pm
What a shock! Next thing your going to tell me that not all “green” products are really good for the environment.
Where can I go now to fill my desires for smug self-righteousness when I am buying coffee?
May 18th, 2011 | 3:38 pm
Where can I go now to fill my desires for smug self-righteousness when I am buying coffee?
Starbucks, of course. They have the cool brand.
May 18th, 2011 | 3:43 pm
JB in CA
But they are all corporate sell-outs! Isn’t there anywhere else?
May 18th, 2011 | 5:45 pm
Where can I go now to fill my desires for smug self-righteousness when I am buying coffee?
Your local farmer’s market. ;-)
May 18th, 2011 | 5:46 pm
i don’t drink coffee. I go for the inherently smug self-righteousness of tea. Now, with fair traded tea I can get a double dose of that good aroma of smug self-righteousness.
http://www.rishi-tea.com/
May 18th, 2011 | 7:51 pm
Starbucks C.A.F.E. (I forgot what it stands for – I used to know) Practices rock.
Basically, Starbucks wants quality beans from reasonably-well educated and healthy farmers who have decent cash reserves to feed their family over the entire plant-harvest-sell cycle. So they, y’know, do things to support that.
http://www.starbucks.com/responsibility/sourcing/farmer-support
May 18th, 2011 | 8:36 pm
I bought some fair trade stuff in the last week — but it was handicrafts, not coffee.
May 19th, 2011 | 1:32 am
About that smug self-righteousness: my son calls that “slacktivism”. Slacktivists are people who take easy steps (which they themselves refer to as “brave gestures”) to show solidarity with down and out groups. On his campus, for example, slacktivists hectored fellow students to go barefoot one day, to somehow show support for unshod Africans. They were unable to explain how this would help the Africans, or if the recipients of slacktivist discomfort would hear of this great plan. It was a beautiful temperate day in California, too, so the discomfort was not all that bad.
May 19th, 2011 | 8:38 am
“It was a beautiful temperate day in California, too”
It was a beautiful temperate day in California, with paved walkways, paid campus groundskeepers, presumably a low soil parasite load, and in a community that presumably has an ethic of not throwing junk on the ground.
How very meaningless.
May 19th, 2011 | 8:42 am
The plantation economies of agricultural commodities are great generators of poverty because of their exploitation of their workers. They don’t pay a living wage, for starters, and then take back that money through company store practices that increase the debt of their workers to the plantation. Prices for these commodities are low because of that factor. How to change that basic reality so that the human dignity and basic human survival of the workers can be achieved is the larger problem. If fair trade coffee has its problems, the non-fair trade coffee creates even worse ones.
May 19th, 2011 | 8:58 am
“If fair trade coffee has its problems, the non-fair trade coffee creates even worse ones.”
My sense is that activists are aware of this. They are also very aware that monoculture farming, while more sexy than food, does not address the actual human or future needs of those who cultivate for an aristocracy, either cultural or corporate.
“Slacktivist” is an interesting term, embraced here as it is by corporate lackeys who insist nothing can be changed about 21st century neoaristocracy. Sounds like a Timothy Leary moment for the Right: Turn on, tune in, drop out.
May 19th, 2011 | 9:13 am
The level of snark in these comments is downright obnoxious – Joe was making a very valid point, but the attitudes here are the reason lots of us are remaining conservative while becoming very disenchanted with conservatives culturally.
May 19th, 2011 | 11:13 am
MRS,
Oh, I don’t know, laugh with us a little. Personally, I love the term “slacktivism,” and Peg, I hope your son doesn’t mind if I steal it.
The problem isn’t that conservatives don’t care about poor coffee farmers in…wherever…I think the problem is that conservatives are sick unto death of being lectured about “doing something” for poor coffee farmers (or whoever), and derided for “not doing something” when that “something” has no real impact on the actual poor coffee farmers.
Just this past weekend, at an ELCA synod assembly, (regional church business meeting), we were encouraged to vote to support a resolution that condemned “bullying” and encouraged the church to work with other anti-bullying groups to help stop bullying. Lots and lots of people stood up, all wanting to share their stories about their son or cousin or granddaughter or next-door neighbor who has been terribly bullied and we need this initiative because…..
Finally one guy stood up said, Look, I’m voting against this. Not because I’m pro-bullying, but because this doesn’t actually do anything besides make us feel good about ourselves. Anti-bullying starts in the home with parents teaching their kids not to be bullies, self-confidence if they are bullied, and how to respond when they see others bullied. It starts with teachers, who have an actual relationship with their students, teaching the class similar things. It doesn’t start with strangers passing resolutions at business meetings saying ‘bullying is bad.’ Everyone pretty much ignored him, of course, but I wanted to stand up and cheer.
It’s the same thing with conservatives. I actually want to see poor coffee farmers not be poor anymore, and not be exploited by landowners OR western corporations. And I’m tired of being judged and condemned by fancy-pants liberals for not doing things that wouldn’t help anybody if I did do them.
And sooner or later, that exhaustion is bound to come out in the form of snark…
May 19th, 2011 | 12:41 pm
I get the fair trade coffee and tea at church because I think they’re tasty, and I guess that makes my palate feel good. The English Breakfast Tea is especially good, and I guess my parish gets some funds out of this. Now you’re telling me that I may be hurting some third world farmers by drinking this stuff. What’s a Christian to do? I want to help the poor, and I think it’s good to help them develop their own micro-economies. That’s in part why I’m involved with my parish’s Haiti committee. But, I don’t want to be counterproductive. I don’t know what to do.
Excuse me now. I have to get another cup of English Breakfast Tea. I just like the flavor. Maybe next time I should just go to Dunkin’ Donuts.
May 19th, 2011 | 1:00 pm
Generally speaking, the best way to help the poor is to foster the most productive economic policies.
The most productive policies are the ones which ultimately create the most jobs in the most places. That is the best cure for poverty.
The most productive economic system is the free-market-under-law system. In such a system the law provides an overall framework for business to be done, contracts to be upheld, and fraud of all kinds to be held in check. There can no longer be any doubt that this is the most productive system.
It’s tempting to think that tinkering with a free system, in order to help this or that group, will be a good thing. When the free market is despoiled this way, usually the Law of Unintended Consequences makes things worse instead of better. In its most toxic form, the Law sees to it that the intended beneficiaries are the ones most harmed.
Such outcomes are more common than you think.
May 19th, 2011 | 3:25 pm
Todd — that’s a parody, right? Because you couldn’t possibly believe that there’s no valid criticism to be made of people who think that purely symbolic efforts are the same thing as doing something that actually benefits the alleged beneficiaries. And real people don’t actually call each other “corporate lackeys” just because they have different ideas about how to benefit the less fortunate, do they?
May 19th, 2011 | 3:57 pm
The problem though is that we get poor both ways. If there is too much coffee, we need to put a LOT of coffee growers out of work through market forces to drive up prices.
Fair Trade has issues, but the intent is to try to prop up the prices by brand cachet. Unfortunately from this it seems to be hijacked yet again by the high-productivity crowd.
May 19th, 2011 | 6:05 pm
“Oh, I don’t know, laugh with us a little.”
If “us” includes connoisseurs of Fair Trade products, sure. Otherwise, it’s just one clique calling out another with a few snickers in the background.
pentamom, it’s not so much I don’t think there’s room for criticism and incisive analysis. Lots of people want to do right by the poor. Fair Trade stuff is one way people trust this does what it says. If it doesn’t, I want more than a few adolescent guffaws.
“Generally speaking, the best way to help the poor is to foster the most productive economic policies.”
In reality, it’s a bit more complicated that that. Third World policies that reinforce the neo-colonialist elite tend to rise to the top. Not things that bring economic production (let alone benefit) to the poor.
From what I hear from friends on the ground in Mexico and Central America, corruption, bribery, and graft rule the roost. The system is geared to short-term profitability, and the fullest exploitation of labor, often backed up with First World money and methodology.
If the Right has some specifics to offer, I’d love to see them. Do you suppose Fr Sirico will ever succeed among the poor in Africa? The Acton Institute, Brazil edition …?
May 19th, 2011 | 6:59 pm
Hmmmm… For the past several years, I have been doing my best to buy fair trade coffee as much as possible. I have also tried to tell other Christians about it so that they could do so.
I agree with Mike: “What’s a Christian to do? I want to help the poor, and I think it’s good to help them develop their own micro-economies…. But, I don’t want to be counterproductive. I don’t know what to do.”
I can say this much: I am not interested in explanations of how fair trade doesn’t work, if those explanations just amount to a return to the same laissez-UNfaire abuses of growth market capitalism which caused people to think of fair trade in the first place. I have faith in the Lord Jesus Christ. I DO NOT have faith in markets or economic policies to bring about the good for the poor.
May 19th, 2011 | 7:06 pm
If there is “simply too much coffee” why are prices continually rising, both in boutique coffee and supermarket brands? Is it possible that the money isn’t making its way back to the growers? After all, this is certainly the case in American farming. Farm incomes fall while agribusiness profits grow steadily. Could not something similar be happening in the coffee industry?
Might be interesting to do a little $$$-following here. My guess would be that while the growers are struggling, the coffee companies aren’t doing half bad.
May 19th, 2011 | 8:45 pm
Hmmm…….fair trade sounds an awful lot like American farm subsidies…..rigging the market to make farmers grow what we don’t necessarily need. More specifically, it sounds exactly like the ethanol subsidy for corn growers.
Ultimately, then, “fair trade” isn’t really trade, and it isn’t really fair.
May 19th, 2011 | 9:04 pm
Rob:
I don’t know. There are a lot more costs than the beans themselves though. My uneducated guess would be the cost of transporting them.
Tod:
I think this may be a growing problem. The economic right has no solutions, and a few of us are becoming disenchanted with it.
May 20th, 2011 | 1:04 am
“Hmmm…….fair trade sounds an awful lot like American farm subsidies…..rigging the market to make farmers grow what we don’t necessarily need”
Actually, no. Fair trade is, surprisingly enough, a market-based idea, as opposed to a government-based one. As far as I know the state isn’t setting the prices or subsidizing the coffee growers. It’s the consumer who’s making the choice to spend a little extra dough on a pound of coffee.
May 20th, 2011 | 7:58 am
If the problem comes down to too much coffee in the world, well… I’ll drink the surplus!
May 20th, 2011 | 9:53 am
“I can say this much: I am not interested in explanations of how fair trade doesn’t work, if those explanations just amount to a return to the same laissez-UNfaire abuses of growth market capitalism which caused people to think of fair trade in the first place.”
I understand the dislike of criticism without solutions, but what’s the point of adhering to a solution that isn’t one, and not wanting to talk about the problem, just because it’s different from the original problem?
May 20th, 2011 | 10:13 am
Rob is on to something – properly understood, fair trade coffee works well. I know of several coffee roasters who work with specific villages and farmers and the results are very good. It doesn’t hurt that the coffee, while pricey, is very, very good – much better than Folger’s or Maxwell House.
As previously noted, the problem is when larger companies like Wal-Mart, Target and even Starbucks get in on the action and mess up the equilibrium. On a small scale, fair trade should work well because it is based on direct relationships between roasters and villages.
Finally, critics should remember that many of us who purchase fair-trade coffee do so because the coffee is often whole bean, locally roasted and far superior to most grocery store offerings.
May 20th, 2011 | 12:03 pm
Hey, pentamom,
It’s more than “dislike of criticisms without solutions.” That’s what most critics of fair trade are saying about fair trade. What I have is more of a mild disgust for responses which are put in as if they were fresh insights but are really just a return to the original problem.
I am neither a Marxist nor an utter critic of capitalism. But the fact that capitalism and the “free” market system as we now have them are demonstrated to be very unworthy for Christians to hail as good. (For examples, note the minimalist ethics and the preaching of faith in the market.)
Most of the critiques of fair trade that I hear just amount to saying, “The best thing that could happen to these indigenous farmers (et al) is for free/growth market capitalism to descend on their villages so they can become just like us. Heck! Maybe in time they’ll get good enough at it that they’ll learn to exploit other villages!”
Of course this isn’t the actual language used. It’s usually stuff like “Incentives matter,” or “Once the stakes of any economic game have changed, people alter their behavior accordingly.” (as Claar is quoted in the article above).
Or take the words of Carter from above: “On the whole, this imposes a static view of opportunity on such farmers and inhibits them from rising above their circumstances.”
Farmers, beware wealthy capitalists who want to “help you rise above your circumstances!”
May 25th, 2011 | 10:00 am
A free, fair, and proper market is where a willing buyer and a willing seller agree to trade goods and services, usually mediated through currency.
May 28th, 2011 | 12:02 am
Greetings from Equal Exchange.
Yes, we’re the folks who jumpstarted the Fair Trade coffee movement in the US 25 years ago. And so we really ought to weigh in.
Unfortunately, this post, and the book & book review cited, contain more errors, distortions and misunderstandings than I can address here.
So I’ll just tackle some of the issues.
• Victor Claar (the author/free trade advocate at the center of this discussion) has not worked in the coffee trade, and he’s relying on text-book theories of how commodities markets are _supposed_ to work. In contrast we’re actually in the thick of the activity that he’s making guesses about. We’re working with farmers, and their co-operatives, and with many allies at all points of the supply chain. And thanks to the market forces that Mr. Claar adores we have to be on top of our game and know what we’re doing. We know from 25 years of direct experience that the economics and market forces faces farmers does not match his simple notions.
• His critique is also flawed because it is a MACRO-economic analysis of what is a MICRO-economic practice. That is like trying to use monetary policy theory for deciding if you should switch cell phone carriers.
• Two flaws in Claar’s argument is that he assumes that coffee farmers actually have better options available to them “if only do-gooders like Equal Exchange didn’t misguide them with distorted price signals”. And he assumes that it switching crops is a simple, essentially cost-free matter, without significant risks or obstacles.
We work over 20+ co-operatives in 14 countries who together represent many thousands of coffee farmers and can assure you that the real world in rural Guatemala or Ethiopia is vastly different than he implies.
A typical coffee farmer grows up on a mountain or hillside, on a plot his or her family has tended to and invested in for a generation or more. The farm is a day’s walk from the nearest town and maybe a four-day drive from the nearest port. This person has very limited economic choices. He/she cannot simply choose to replace their coffee orchard with a cherry or apple orchard. They cannot follow one season’s price signals and switch to soy beans or strawberries, and then switch back again. And even if they could they lack the commercial and physical infrastructure requisite for the new crop (for ex. a continuous chain of refrigerated trucks, warehouses and ships for perishable fruit and vegetables). And the agricultural and commercial knowledge required to succeed with the new crop is missing too (and don’t hold your breath for armies of technical advisors from the big cities to show up and provide this know-how for free).
With very limited schooling in their community they have little or no access to “professional” career paths. Unfortunately, some of the choices that they DO have before them are to grow drugs, move to the slums around Lima or Nairobi, or migrate illegally to the U.S. or Europe.
The fact is that farmers the world over are usually making prudent decisions in very constrained circumstances. EVEN AT THE TYPICALLY LOW-MARKET PRICES, GROWING COFFEE (or cacao or bananas etc) IS OFTEN THE MOST RATIONAL, UTILITY-MAXIMIZING, RISK-MINIMIZING DECISION AMONG MANY POOR CHOICES AVAILABLE TO THEM.
With Fair Trade we make their hard work a little better compensated, a little less risky and a little more sustainable (both economically and ecologically), and in this way we try to make the transaction a little more just.
And this is a big part of the reason why 10 faith-based organizations partner with, and endorse Equal Exchange’s work, and have worked with us for up to 13 years now. Many of them also work with farmers in developing countries and they know well that conventional markets often work very badly for the very poor. And they have seen – year after year – the positive, sustainable, commercially viable difference Fair Trade makes.
You can see a list of our partners at: http://www.equalexchange.coop/interfaith-program
(You can read a longer version of this pt of view at http://www.yaledailynews.com/news/2011/feb/22/north-a-fair-shake-for-world-farmers/
Respectfully, Rodney North
http://www.EqualExchange.coop
May 31st, 2011 | 10:31 am
Thanks to Rodney of Equal Exchange, a long time trusted partner of Catholic Relief Services (CRS) Fair Trade, for letting us know this dialogue was happening.
I had read Mr. Claar’s book awhile back and confess I had pretty much dismissed it for some of the errors that Rodney addresses above. My colleague Michael Sheridan has been tackling the more recent critiques based on his work with CRS on a four country coffee project with thousands of farmers. I commend his observations to you:
http://coffeelands.crs.org/2011/05/what-that-study-means-to-me/
But I am in this space in reference to the claims of smug self-righteousness and slacktivism. I’m writing as an employee of CRS, the official humanitarian agency of the Catholic community in the US, AND as a person of faith (my tradition is Quakerism).
I’ve been involved in Fair Trade for more than a decade both within CRS and without. In many different communities I have witnessed that the Fair Trade movement–with its focus on offering equitable opportunities and developing the common good, not just prices or labels–brings out the best in people. Whether it is on a farm in Nicaragua or a college campus in Ohio, the principles of Fair Trade, with their focus on dignity, stewardship, and empowerment, actually do in many cases transform people’s relationship with each other, with consumption practices, with power dynamics, and with the planet.
Don’t get me wrong, Fair Trade is far from perfect. At times, when I have been confronted with some of the factual realities of the Fair Trade certification system or practices of Fair Trade companies (not just coffee mind you but also crafts, chocolate, fruit, etc) I have had sleepless nights worrying I was promoting an approach that was too far removed from its claims. I also recognized that in an effort to distill Fair Trade’s potential into simple slogans or “elevator speeches” educators like myself contribute to slacktivism if we suggest that buying the right cup of brew will eliminate poverty.
I know that I make my (good) living convincing institutions and individuals that Fair Trade is a way to live in solidarity with the poor, that Fair Trade is a model that can transform the way market-based business is done and that, on the whole, its impacts are positive and supportable. The doubts raised in this blog and other places are deeply relevant to me as a person and as a professional.
Reading the research, talking with the analysts, experiencing the impacts, what I am generally at peace with is that Fair Trade does more GOOD than harm. Recently we posted some testimonials to that effect on You Tube (just search Catholic Relief Services Fair Trade).
Legitimate critiques should be welcomed and should inform the practices of the Fair Trade movement. Nonprofit organizations, businesses, cooperatives, and faith communities need to hold each other accountable. We need to do so in partnership with our brothers and sisters around the world who are, supposedly, at the center of our concern.
We at CRS welcome open debate, productive suggestions, and engagement in our efforts. CRS Fair Trade is working to “build an economy for everyone.” That means every one of us needs to be involved and I’m not sure finger pointing gets us to a better place. We are working to deliver not just on the promises of Fair Trade but on the Gospel call to economic justice. Please join the Fair Trade movement; don’t abandon it.
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